The $5bn outsourcing contract awarded to IBM, the global technology firm, by JP Morgan Chase has been put at risk following the bank's acquisition of Bank One, sources close to JP Morgan have confirmed.

The bank is believed to be considering whether parts of the contract are still necessary as Bank One already has the in-house capacity to manage some elements which have been outsourced to IBM.

The value of the deal is equal to about 20% of IBM's total 2003 revenue from financial services.

Jamie Dimon, chief executive of Bank One, who will replace JP Morgan Chase chief executive Bill Harrison in 2006, has cancelled similar contracts in the past and has said that he wants to cut excess costs out of the merged entity.

Sources close to JP Morgan said a big part of IBM's remit was to develop and maintain the systems for two of JP Morgan's most technology-intensive businesses - retail banking and custody.

These are the areas with the most overlap with Bank One, which has already built technological capacity for them. Over the past two years, Dimon is believed to have spent $500m hiring 3000 IT staff to build new systems at the bank.

JP Morgan struck the seven year deal with IBM in 2002. It was one of the largest outsourcing deals ever done in the financial services industry. About 4000 JP Morgan staff transferred to IBM and it is believed that some of these may be hired back by the bank if the contract is cancelled. The bank is not expected to make a decision regarding the contract until the middle of the year.

Questions emerged about the outsourcing deal in January when the banks announced their merger.

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Dimon said at the time: "Whether we outsource some of it or not isn't the ultimate goal. Hard cost cutting will take place to make sure that we are getting the right value of what we are paying from anybody. We did nothing but invest in systems for years. We did cut some costs, but we built new systems almost across the board. This combined company should be doing the same. I still think we will get some costs cut out of it."